Michael Ross, Warehouse Express: 5 Important KPIs for Online Retailers.mp4

Uploaded by think on 13.05.2010


MICHAEL ROSS: A real challenge online is how to think about
your key performance indicators.
So-called KPIs.
What to track, how often to track it, what
success looks like.
A good example of this was, a retail CEO asked me recently,
said Michael, you know, what is a good
online conversion rate?
To which I answered, it's simply not a good question.
The challenge online really is that there's just such an
overwhelming amount of data.
Often I meet retailers who have 50 KPIs.
And to have 50 key performance indicators is an oxymoron.
The challenge online is to distill online down to really
its core essence.
The other challenge I have is that a lot of online retailers
look to web analytics for their source of KPIs.
And the challenge of web analytics, really, is it tells
you what's going on on the website, but it tells you
nothing about online profitability.
So my challenge, and where I ask online retailers to focus,
is on actually coming up with the set of KPIs that really
give them a holistic view of the overall performance of
their business.
My contention is that are five fundamental ecommerce KPIs
that should apply to all retailers, in all categories,
in all geographies.
These 5 KPIs are as follows.
Number 1 is sessions.
How many sessions, visits, are you driving to your website?
For a traditional retailer, it's the same as footfall.
The second KPI is profit procession.
Again, for a traditional retailer, that would be
something more akin to profit per square foot or profit per
linear foot.
And profit procession is really about understanding how
much is it costing you to drive traffic to your website,
and how much money are you making from each visitor that
arrives at your website.
And it forces a retailer to make the right trade-offs
between marketing spend, pricing, promotions,
discounts, and delivery charges.
The third metric is lost demand.
It's one thing to measure what you're actually selling.
It's another thing to measure what you could have sold if
you had perfect availability.
And to understand the extent to which your site's
availability is holding back your demand.
The fourth metric is contribution over inventory.
A kind of return on capital measure.
It's about how efficiently are you managing your inventory?
Are you selling everything you could be selling?
Do you have product in your warehouse that isn't on sale?
And essentially managing your inventory in a very
economically efficient manner.
And the fifth metric--
last, but certainly not least--
is customer satisfaction.
Clearly in an online environment, there is a time
between the transaction and customers actually receiving
their products.
And therefore, delivering a great customer service
experience, a great fulfillment experience, is
fundamental to overall success.
So those are my 5 KPIs.
I would encourage every online retailer in the
world to track them.